1. Set up an S corp. All contracts and such were done through my corp, not me.

2. Hired myself and drew a small salary, but with "full everything". I had to do social security taxes, withholding, unemployment insurance - the works. But I only paid myself $22K so even with this, it was still cheaper than paying self-employment tax on the $120K or so I was making. $22K was the minimum I could get away with based on advice from my CPA. (Actually, I set the withholding rate such that I just paid my salary to the IRS...)

3. Drew out the rest of the income at "normal" tax rates.

4. Put as much expenses as possible in the corp, and wrote off everything.

I did things this way for four years. This did the following:

1. Avoided most self-employment tax, which is (was?) 15.7% on top of regular income tax.

2. Made it easier to take deductions and such.

My general advice is that a corp is good, although expensive to getgoing. If you do it, set up everything separate (although this isgood anyway, even without a corp you'll need to carefully keepexpenses done on contracts organized so you can claim them as tax deductions). As for setting up, I didn't use a lawyer and used theNolo Press incorporation kit, but I did have a CPA. I'd onlyrecommend it if you are making at least $50K or so, but it's worthit to talk to knowledgable tax people about all this.

One thing I *do* know is that, for the checks you've already received,you can't do them through a corp unless you can talk your husband'scompany into cutting the Form 1099 they'll send in the corp's name,not in your husband's. Otherwise, the 1099 will be in your husband's name and social security number and you'll have to file a ScheduleC on it.

Announcements

Disclaimer:
In accordance with IRS Circular 230, you cannot use the contents of any post on The Motley Fool's message boards to avoid tax-related penalties under the Internal Revenue Code or applicable state or local tax law provisions.

When Life Gives You Lemons
We all have had hardships and made poor decisions. The important thing is how we respond and grow. Read the story of a Fool who started from nothing, and looks to gain everything.

Work for Fools?
Winner of the Washingtonian great places to work, and Glassdoor #1 Company to Work For 2015! Have access to all of TMF's online and email products for FREE, and be paid for your contributions to TMF! Click the link and start your Fool career.